CMS Releases Hospital Pricing Data

In a statement released late Wednesday by the American Hospital Association, Rich Umbdenstock, AHA president and CEO said "there are many parts of the healthcare delivery and financing systems that urgently need updating, and the matter of 'charges' is among those at the top of the list."

The Medicare program "no longer negotiates hospital payment rates—it unilaterally sets them through annual regulations, resulting in payments that now average about 95 cents on the dollar of Medicare-allowable costs," he added.

Umbdenstock says large insurance companies "negotiate rates…based on an array of factors, including each hospital's proposed rates, scope of services…accessibility and [community] reputation within the community. It would create serious antitrust risks for hospitals to share the proposed or negotiated rates with each other. Variation in charges, therefore, is a byproduct of the marketplace so all parties must be involved in a solution, including the government."

In addition to the unprecedented data release, Sebelius announced that HHS has made $87 million available to states to enhance rate review programs and to create a more transparent health insurance markets for their residents.

States may use the monies to fund pricing data centers to collect, analyze, and publish health pricing and medical reimbursement data in their area. Sebelius pointed to New Hampshire, where the state has a website of healthcare costs for a variety of procedures. "Residents can find the cheapest CT scan or MRI in their area in less than a minute."

Frank Poggio (5/12/2013 at 11:32 AM)
This report should be filed under the heading "We have seen the enemy and it is US!"...Pogo, circa 1960. If there was ever a report that was self-indicting this is it. Yes hospital charges are non-sense, all over the map, not based on logic, etc. All true. But how'd that happen. As a former CFO I can tell you it was all done via the Medicare Cost Report, the core basis of Medicare payment system. For almost five decades the government has used the Cost Report, and a myriad of other convoluted reimbursement systems, to calculate payments to hospitals. So over the decades any good CFO would make sure that his charges maximized his governmental payments. And Medicare and Medicaid usually make up 60% or the his total payments. Some fifty thirty years ago charges became a substitute for statistics and cost accounting to estimate how much the government was going to pay you. Ever hear of RCCAC? That's the Ratio of Costs to Charges as Applied to Costs, a key calculation in the Cost Report. One of the most insane ways of 'identifying' costs ever cooked up. And it's still used today! Hospitals get paid based on DRGs, but still must do a Cost Report to justify the DRG amounts. I was around in 1983 when the feds came up with DRGs, they said back then the DRG system would replace the Cost report...and here we are 30 years later- with both! If you want to know why charges are a mess...just look at the Cost Report, and ask who created that monster? Frank Poggio The Kelzon Group KelzonGroup.com

Mark Egge (5/9/2013 at 7:03 PM)
It'll be interesting to see whether CMS's publication of charges either a) reduces and standardizes charges, or b) simply injects more confusion into healthcare pricing. Ultimately, there's almost no correlation between charges and actual payment[INVALID]so posting charges is going to make it hard for anyone (other than the uninsured) to shop around. In our view, hospitals could just as rationally charge $1m for every DRG. It wouldn't make a difference. Here's our take: http://atlasrevenuemanagement.com/atlas-insights/healthcare-costs/physician-charges-dont-matter/

Linda Branam (5/9/2013 at 3:36 PM)
Ken, please note that you are not in the category of patients who will benefit most directly: Sebelius stressed the value of the data to the uninsured and underinsured, who she says are often expected to pay the full chargemaster rate. For elective procedures those consumers can "easily compare average prices" at local hospitals and factor those costs into their decision on where to have a procedure performed. [end quote] As for your insurance paying your charges, the more insurance companies have to pay, the higher your premiums are. So if they can compare costs, they can pay the lowest price. And you can keep an eye on whether they pass the savings on to you. ;-) Everyone benefits.